I’m reading about the changes in values of currencies at the moment, and I struggle to understand:
How are the values of currencies determined in relation to one another (e.g. EUR to GBP or GBP to USD), and why are some “stronger” than others?
I don’t understand why the GBP would be the strongest (or so it seems to me), followed by the EUR (although it’s recently been supplanted by the USD), and then the USD? With USA being the top economy in the world, and things like oil and gas traded in USD, why isn’t the USD the highest valued currency?
In: 3
The total value of all USD is much higher than all GBP. There are many more of them.
The actual value of a single one is relatively arbitrary – many countries which had high inflation introduced “new” currency that was the old one with a number of zeroes chopped off.
What matters most in the end, is how they move up and down compared to each other. If one somewhat consistently gains value compared to most others, it is a strong currency.
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